1) When statutes are passed only after considerable study, debate, and public input, this is an example of which function of the law?

A. Shaping moral standards

B. Maintaining the status quo

C. Facilitating orderly change

D. Keeping the peace

2) A corporation is considered a citizen of what state?

A. The state where the president of the corporation lives

B. The state where the majority of the employees live

C. It is not a citizen because it is a business

D. The state where it filed its Articles of Incorporation

3) Which clause in the U.S. Constitution is most used in terms of regulating business activities?

A. The Bill of Rights

B. The Supremacy Clause

C. The First Amendment

D. The Commerce Clause

4) Which of the following statements is true regarding the relationship of law and ethics?

A. Depending on the circumstances, the law can require a higher, lower, or the same standard of conduct as ethics demands.

B. The legal requirements will almost always be the same as the ethical requirement because the law is based on ethical standards.

C. In some cases, ethics will require a higher standard of conduct than the law, but never vice versa.

D. In some cases, the law will require a high standard of conduct than ethics, but never vice versa.

5) Marion owns a dress shop, where she personally makes all the dresses she sells. Marion sees a beautiful dress at a designer shop and buys it. She examines the dress carefully, so she can design a dress pattern to duplicate it. She duplicates the dress exactly, and sews the dress in several sizes to sell in her store for a lower price. Then she returns the dress to the store where she bought it for a full refund. Has Marion acted ethically?

A. No, because she is asking a lower price for her dress

B. Yes, the store was not hurt because the designer store’s customers would not go to her store anyway.

C. No, Marion is undercutting the designer shop with merchandise that is deceptively similar.

D. Yes, because she is competition is fair in a capitalist society

6) Which of the following statements is true?

A. A course of action can be legal but not ethical.

B. If something is legal, it is always ethical.

C. Practices that are legal in the United States are legal everywhere in the world.

D. Practices that are ethical in the United States are considered ethical everywhere else in the world.

7) A court can enter a judgment notwithstanding the verdict when the following has happened?

A. The jury was sequestered.

B. A jury could not reach an agreement on what the verdict would be.

C. The court finds that the jury acted out of a bias or after jury misconduct.

D. The judge’s personal opinion is that the jury made the wrong decision.

8) A defendant fails to answer a civil lawsuit, what is likely to happen?

A. The court will order that the defendant go to jail until he or she agrees to answer.

B. A court will contact the defendant and ask him to answer the lawsuit.

C. The court will grant a default judgment against the defendant.

D. The court will dismiss the case.

9) What facts justify a state court’s exercising personal jurisdiction over an out-of-state defendant?

A. The state is most convenient for the plaintiff.

B. The plaintiff lives in that state.

C. The defendant has sufficient contacts with the state such that the state’s exercise of personal jurisdiction of him in not unfair.

D. The defendant lives within 100 miles of that state.

10) Damages intended to punish a defendant and deter the defendant and others from engaging in the same tortious conduct in the future are called

A. nominal damages

B. penalty damages

C. retribution damages

D. punitive damages

11) Carlos is an investment broker, operating as a sole proprietor. William is his employee. Juanita, a new client, gives William $1,000,000 in cash to invest for her, and William gives her a receipt. Instead of investing the money, William takes the $1,000,000 and leaves the country. Carlos learns of the transaction for the first time when Juanita appears at the office a month later to discuss the allocation of her investments, and shows him the receipt signed by William. Juanita is upset to learn that Carlos does not have her money, and tells him she is going to sue. What will be the outcome of Juanita’s suit against Carlos?

A. Juanita will lose the case because she cannot find William to serve him with a lawsuit.

B. Juanita will recover a judgment against Carlos for the entire amount.

C. Juanita will recover a judgment against Carlos for half the missing money.

D. Juanita will lose the case because was not informed of the transaction.

12) Denise, a small-town doctor, is sued for medical malpractice because she did not correctly diagnose a rare tropical disease, from which her patient died. The standard of care that will be applied by the court is:

A. Denise will be judged by the reasonable person standard

B. Denise will be judged by the standards applicable to small-town doctors

C. Denise will be judged against the standard applied to tropical disease specialists

D. Denise will be judged by the highest medical standards

13) George says to Judy, “If you promise to train my employees within 6 months, I promise to pay you $3,000.” Judy replies, “OK, you’ve got a deal.” Judy appears at George’s office and successfully trains the employees, but the training is not completed until 6 months and 2 days later. Will Judy be able to enforce George’s promise to pay her the $3,000?

A. No, Judy will not be able to collect the $3,000 because there was no written agreement.

B. No, Judy will not be able to collect the $3,000 because she took longer than 6 months to complete the training.

C. No, the parties have not reached an agreement about when George would pay Judy, so there is no contract.

D. Yes, Judy will be able to recover the $3,000 because she substantially performed the contract.

14) Pete and Vicky make the following agreement. Pete promises he will go into a store and buy something for $5 and pay for it with a $100 bill on which he has written “Happy Birthday Vicky!” Vicky promises that after Pete collects his change and leaves the store, she will go into the same store and buy something that costs $5 and pay with a $10 bill. When the clerk attempts to give her change for $10, Vicky will claim that the $100 bill that is in the cash register was money she just got for her birthday, and will demand change from a $100 bill. Then Pete and Vicky will split the extra money they think Vicky will receive in change. Is this a valid contract?

A. This is not an enforceable contract because the agreement is not in writing.

B. This is a voidable contract because Vicky can change her mind.

C. This is a void contract, because the parties agreed to commit fraud.

D. This is a valid contract. There was a promise in exchange for a promise, and both parties got what they wanted.

15) Which of the following best describes how e-mail contracts are viewed under the law?

A. E-mail contracts are generally treated similarly to contracts negotiated by other means.

B. E-mail contracts are valid so long as both parties sign a written copy printed out from the e-mail.

C. E-mail contract are valid only for contract less than $500.

D. E-mail contracts for goods can be valid, but not email contracts for services.

16) Ted’s Gifts and Sweets enters into a written contract with Bannon Candies to supply Ted’s with 60 dozen boxes of coconut clusters each month for sale to the public. The agreement contained an integration clause. Before the first delivery under the contract, Ted and his warehouse manager called Debbie, the Bannon’s account representative, to request that the candies be delivered in special Valentine boxes. Debbie told Ted, “Don’t worry, I’ll tell the shipping department to take care of that.” When the candies were delivered, they were in standard cardboard boxes. Ted called Bannon and threatened to sue for breach of contract. Will Ted prevail in his suit?

A. No, Ted will not prevail because his attempt to modify the agreement was not effective.

B. Yes, Ted will prevail because he has a witness to the telephone call.

C. No, Ted should have written a letter to change the type of boxes in the contract.

D. Yes, Ted made a valid modification to the parties’ original agreement.

17) A retailer ordered some inventory by phone from a manufacturer. The order was for 1,000 machines from the manufacturer’s inventory at $300 each. The manufacturer sent the retailer a fax a few moments later detailing the order. The retailer looked at the fax and was satisfied that it stated the terms of the contract, but never responded in any way. When the goods were delivered on time a month later, the retailer refused to accept them, asserting that the contract was unenforceable.

A. The contract is enforceable under the written confirmation rule.

B. The contract is enforceable because it would be unconscionable not to enforce it.

C. The contract is unenforceable because the retailer has not signed it in writing.

D. No writing is needed because of one of the exceptions to the Statute of Frauds.

18) Patty went to a used car lot and purchased a car. Two weeks later, the transmission fell out as she was driving to work. She contacted the dealer to complain, but the dealer told her the car had been sold “As Is”. The dealer advised her to check in the glove compartment of the car, where Patty found a notice that stated, “This vehicle is sold AS IS. The purchaser will bear the expense of any repairs that are necessary to this vehicle.” Does the notice mean that Patty has no rights against the dealer with respect to the condition of the vehicle?

A. No, the notice is there for subsequent purchasers of the car.

B. Yes, the notice operates to void any warranty on the vehicle.

C. No, the notice was not conspicuously displayed on the vehicle.

D. Yes, Patty should have inquired about the warranty when she bought the car.

19) Bruce and Diane are ranchers. Bruce owns the property next to Diane’s property. Bruce needs more pasture for his cattle, so he rents five acres of Diane’s ranch for pasture land. This arrangement continues for more than 20 years. Then Diane sells her ranch, and the new owner tells Bruce to stop using the pasture land. Bruce claims ownership of the land by adverse possession. Will his claim succeed if the case goes to court?

A. No, Bruce has failed to show that the value of the land was equal to the rent.

B. Yes, Bruce will own the pasture land, but he will have to pay rent to Diane’s purchaser.

C. No, Bruce failed to show that he claimed the land adversely to Diane’s interest.

D. Yes, Bruce has had actual possession of the land for more than 20 years, so he owns the land under the doctrine of adverse possession.

20) Mary and George are a husband and wife who reside in a community property state. For 30 years, George has been the sole provider while Mary cared for the children and home. George dies, leaving a will that leaves his estate to their three children, now adults. How is the ownership of the house affected?

A. Mary and the adult children each own a quarter interest in the house.

B. Mary and the adult children become tenant in the entirety.

C. Mary owns half interest in the house, and the adult children own the other half.

D. Mary owns the entire house, as the community survivor.

21) An easement can be defined as

A. an option to purchase the land of another

B. a life estate in the property of another

C. a relaxation of the borderlines between two parcels of land

D. a limited right to use another person’s land for a particular purpose

22) Which of the following is true when a general partnership is converted to an LLC?

A. The members will retain unlimited personal liability for obligations incurred while the business was a partnership.

B. The profit and loss sharing terms must remain the same as they were in the partnership.

C. The conversion can be made retroactive for up to two years.

D. The property must be sold to a third party who then immediately sells it to the LLC.

23) Ricardo and Robert operate a hardware store as general partners. Robert is unmarried, while Ricardo is married to Jenna. Ricardo is killed in an accident and his will leaves all his property to Jenna. What happens to Ricardo’s interest in the partnership?

A. Ricardo’s interest is divided equally between Robert and Jenna.

B. Robert becomes sole owner of the hardware store and owes Jenna nothing

C. Robert becomes sole owner of the hardware store, but owes Jenna the value of Ricardo’s interest in the business.

24) John and Jake are partners in a bowling alley. Business has been bad lately, and they need more operating capital, so they invite Lisa to become a partner. What liability does Lisa have for partnership debts?

A. Her liability is limited to the amount she invested.

B. She owes an equal share in all debts incurred after she became a partner.

C. She owes an equal share of all partnership debts.

D. She owes one third of all the partnership debts.

25) Rita is the sole shareholder of an auto repair shop that is incorporated. She is at work one day when her sister comes in and tells her she needs $100 for schoolbooks. Rita looks in her wallet, and seeing that it contains no money, opens the cash register and takes out $100, which she hands to her sister. The sister looks worried, but Rita tells her, “Don’t worry; I take money out of the cash register all the time for my personal expenses. It’s my business, so I can take money out whenever I want.” Her customer, who is waiting to pick up his car, tells Rita that she is risking the piercing of the corporate veil. Is the customer correct?

A. Yes, Rita is co-mingling personal assets with corporate assets.

B. Yes, Rita is not the board of directors.

C. No, the customer is wrong.

D. No, Rita is the only shareholder and can do what she wants.

26) Fred wants to start an adult daycare business, but is worried about potential liability. He hires an attorney to incorporate his business, but does not want to keep paying the attorney, so he dismisses the attorney as soon as the incorporation is accomplished. What else must Fred do to make sure he holds on to his protection from personal liability?

A. He must hire an independent contractor to take over the care of the patients.

B. He must buy malpractice insurance.

C. He must post a disclaimer, advising persons who visit the property that the management is not responsible for injuries to guests.

D. He must maintain the corporate formalities and records.

27) If a creditor is owed money by an insolvent corporation, its best bet to collect is to try to

A. force the corporation to refinance its debts

B. persuade a court that the corporation is inadequately capitalized, in hopes the court will lift the corporate veil

C. force the corporation to raise its prices to increase income

D. persuade a court that the corporation has hidden assets against which the creditor may levy

28) If a corporation is properly incorporated in one state and wants to do business in second state, the corporation

A. may be required to obtain a certificate of authority from the second state

B. must do nothing because being incorporated in one state entitles the corporation to do business in all states

C. must register with the Interstate Commerce Commission

D. must incorporate in the second state

29) A particular issue of stock carries a stated dividend rate of 8 %; that if this dividend is not paid during a particular year, it will be paid in a subsequent year before common stock dividends are paid; and that upon liquidation of the corporation, the owner will receive $300 per share before the common stockholders get anything. This stock is

A. noncumulative preferred stock with a liquidation preference

B. preferred stock

C. cumulative preferred stock with a liquidation preference

D. common stock

30) The DEF Corporation is incorporated in Texas. It wishes to do business in Oklahoma. Before DEF can legally do businesses in Oklahoma, which of the following must it do?

A. DEF must domicile itself in Oklahoma.

B. DEF must incorporate in Oklahoma.

C. DEF must qualify (register) to do business in Oklahoma.

D. Nothing; DEF automatically has constitutional rights to do business in Oklahoma.

31) What is the primary purpose of the Occupational Safety and Health Act?

A. Its purpose is to promote the provision of healthcare benefits by employers having more than 15 employees.

B. Its purpose is to reduce the application of industry standards to workplace conditions.

C. Its purpose is to compel employers to provide a work environment that is free from recognized hazards that could cause death or serious injury.

D. Its purpose is to protect the safety of workers and the safety of those who purchase the employer’s products or services.

32) Which of the following rejected applicants may have a valid claim for discriminatory hiring practices?

A. A university did not hire a 22-year-old woman to be a director of faculty because she was too young.

B. A Catholic school did not hire a teacher because he was not Catholic.

C. A trucking company did not hire a truck driver because she was pregnant.

D. A public health service did not hire a registered nurse because his shaking hands prevented him from administering injections.

33) Which of the following best describes the status of the employment at will doctrine in the United States today?

A. It still applies today, but only to employees who are expressly told that they are an at-will employee when they are hired.

B. It applies more today than in the last century, and the quantity of corporate layoffs is evidence of this.

C. It today applies only to the employer, although in the past it applied to both the employee and employer.

D. It applies in most states to most employment relationships, but there are many exceptions that limit its application.

34) Company employee handbooks have been found to amount to a(n) ______________ exception to the employment at will doctrine.

A. contract

B. tort

C. public policy

D. apparent

35) Which of the following best describes the employment at will doctrine?

A. Whether an employment relationship continues is based on the will of the government.

B. Employees remain employed only if the employer wants them to be employed.

C. Employees remain employed only if both the employer and the employee want the employment relationship to continue.

D. Employees remain employed only if the employee wants to be employed.

36) Under the employment at will doctrine, employment relationship can be terminated

A. by either the employer or the employee

B. by the employee only

C. only by mutual agreement of the employer and employee

D. by the employer only

37) Which of the following is true about misappropriation of trade secrets?

A. Injunctions are generally not available to protect trade secrets.

B. Although it is not necessary that the trade secret be patented, the secret must be such that it could be patented.

C. The plaintiff can recover only if the defendant acquired the secret through illegal means.

D. Trade secrets are protected regardless of the actions of the trade secret owner.

38) The law gives the consumer what protection from aggressive tactics of door-to-door salespersons?

A. The customer may file a police report.

B. The customer may rescind the transaction within 3 days.

C. The customer may send the product back for a refund within 30 days.

D. The customer may keep the product without paying for it.

39) In general, trademark protection is granted based on whether the trademark is

A. distinctive

B. novel and useful

C. understandable to the general public

D. the original creation of the trademark registrant

40) Rachel and Roy are married. Phillip is a private investigator, who is following Rachel at Roy’s request, to see if she is involved in another relationship. At one point, Rachel enters a “women only” gym, where Phillip cannot follow. Phillip calls his friend Sue and tells her that if she will enter the gym and observe Rachel, Roy will pay her $25 an hour for her services. Sue goes to the gym and observes Rachel for 3 hours, after which she bills Roy for $75. Must Roy pay Sue’s bill?

A. No, because Sue is not a licensed private investigator

B. Yes, because Phillip was acting as Roy’s agent when he hired Sue

C. Yes, because Sue is entitled to collect on a quasi-contract basis

D. No, because Roy is not liable for contracts entered into by Phillip

41) Patricia owns a Mexican restaurant, famous for home-made tortillas. The tortillas are made by several women, who make the tortillas in their homes and sell them to the restaurant. Some of the women have been making tortillas for Patricia for years, while others have just started. Patricia pays for the tortillas by the dozen. What is the nature of the employment relationship between the women and Patricia?

A. The women are agents of the restaurant.

B. The women are employees of the restaurant.

C. The women are independent contractors.

D. The women are part-time employees of the restaurant.

42) The primary factor that determines whether someone is an independent contractor or an employee is

A. whether the employer withholds taxes or not

B. whether the worker clocks in and out of the job

C. whether the employer controls the details of the job performance

D. whether the worker has other clients

Solution Description

he primary factor that determines whether someone is an independent contractor or an emplo